7 Credit Score Myths Indians Believe That Are Costing Them Money

Credit score myths are surprisingly expensive. Believing the wrong thing can cost you lakhs in higher interest over a lifetime. Here are the 7 most widespread myths among Indian borrowers — and the truth that replaces each of them.

Myth 1: Checking My Own Score Hurts It

FALSE. Checking your own credit score (called a soft inquiry) does NOT affect your CIBIL score. Only hard inquiries — when a lender checks your score after you apply for credit — can slightly lower it (CIBIL does not publish a per-enquiry figure). Multiple applications in a short period can compound this damage. Check your own score as often as you like. It is free once a year at cibil.com.

Myth 2: Closing Old Credit Cards Improves My Score

FALSE. Closing old cards typically hurts your score in two ways: it reduces your total credit limit (which raises your utilisation ratio), and it shortens your average credit history. Keep old cards alive with a zero balance unless they charge an annual fee you cannot justify. See the full 6-month improvement plan for how credit age fits into recovery.

Myth 3: A Loan Rejection Drops My Score by 100 Points

FALSE. A rejection itself does not lower your score — only the hard inquiry the lender made before rejecting you does, usually by a small, temporary amount. Multiple applications in a short period create multiple hard inquiries which compound. Apply to one lender at a time, strategically and selectively.

The Remaining 4 Myths

• Myth 4 — Zero debt means a perfect score: FALSE. You need active credit usage and on-time repayment. No credit history means no score, which also blocks loan approvals.
• Myth 5 — Salary level affects CIBIL score: FALSE. Income is not part of the CIBIL score calculation. A ₹20,000 per month earner can have 800 CIBIL; a ₹1 lakh earner can have 600.
• Myth 6 — Settling a loan is the same as repaying it: FALSE. Settled means negotiated for less than the full amount. It stays on your report as a negative for 7 years. Always pay the full outstanding amount.
• Myth 7 — My spouse's bad score affects mine: FALSE. Credit scores are strictly individual in India. Only joint accounts or loan guarantees create a linkage between two people's scores.